Question

On May 1, 2021, Bonita Industries declared and issued a 10% common stock dividend. Prior to this dividend, Bonita had 195000 shares of $1 par value common stock issued and outstanding. The fair value of Bonita's common stock was $24 per share on May 1, 2021. As a result of this stock dividend, Bonita's total stockholders' equity:______

a. decreased by $480700.
b. increased by $480700.
c. did not change.
d. decreased by $23000.

Answer 1

No Answer in Option but the Equity decreases by $468,000

Step-by-step explanation:

From the question,

Common Stock that Bonita industries had at par $1 = $195,000

They issued a common stock dividend= 10%

The Value of Stock dividend = 10/100 * 195,000 = $19,500

The fair value of Bonita's common stock was $24 per share on May 1, 2021. Hence, the stock dividend will be 19,500 * 24 = $468,000

We must understand that Stock dividend are issued from Retained Earning, hence as a result of this stock dividend, Bonita's total stockholder equity decreased by $468,000